But if it becomes law in its current form, a controversial clause means the Secretary of State (currently the unelected Lord Peter Mandelson) could change Internet copyright laws on a whim.

“The Digital Economy Bill is designed to speed the introduction of broadband into this country and, generally, that is a good thing. But there are certain aspects of the bill which are completely disproportionate,” said Liberal Democrat peer Lord Clement Jones.

“Clause 17, which is particularly the worst aspect of the bill, basically gives the government the right to amend copyright law relating to the Internet without going through the proper parliamentary process,” he added.

Those changes could go as far as introducing higher fines, or even prison sentences, for ordinary computer users who share files.

Andrew Robinson, head of the Pirate Party in the UK, thinks that the bill will have a terrible impact on the internet in Britain, noting: “We have to decide, as a society, how much power we want to give to the government to do thing like this. We think that this bill is definitely going far too far.”

Britain’s many young web and tech companies are the face of Digital Britain that the government says it wants to encourage. But it is these very firms that some fear would be most harmed by the Digital Economy Bill.

One of those companies is Techlightenment, which designs targeted advertising for use on social networking sites. Gi Fernando co-founded it on a bet two years ago, and it now has annual revenues of nearly US$3 million. He argues that an unstable legal environment will stifle the innovation that is so crucial in a fast moving world.

“Our clients are going to be severely unstable about it. I can just imagine, it is almost like in other industries which are over-regulated, where social media and connectivity of the Internet are having real implications, because you go round and round in circles and you cannot innovate. So it is a throttle. In the medium term, given the world is changing so fast, it could be severely damaging,” Fernando said.

Some accuse Business Secretary Lord Peter Mandelson of bowing to pressure from his Hollywood connections. Last August, shortly before the bill was published, Mandelson had a private dinner with David Geffen, Hollywood mogul, co-founder of the Dreamworks studio, and vehement critic of illegal file sharing.

“I think that Peter Mandelson has been duped, frankly, by the music industry. Some of the rights holders right at the top of the industry have told him that they need these enforcement measures in order to secure investment, but this is just a game. The fact is that the business is and business models work,” said executive director of Open Rights Group Jim Killock.

Some of the Internet’s most powerful operators object to Clause 17. Google, Facebook, Yahoo and eBay joined forces to write an open letter to Lord Mandelson, urging him to drop the clause. The fear is a bill including this provision will be less about a brave new digital world, and more about protecting the old 20th century business models used in music and film. But the government insists it will ensure the UK is at the cutting edge of the global digital economy.

Unregulated Internet is digital anarchy

“Now the Internet is an open club for millions of people and those millions do not realize what they do in the global network,” says Andrey Mikhailyuk, editor-in-chief of Russian hardware magazine Zhelezo.

Mikhailyuk believes that web-surfers should obey social network rules, which should be generated by Internet service providers and site managers. Internet services should be used equally in all countries, he said.